23 Apr 2009 07:00
IRP Property Investments Limited
Interim Management Statement
For the Three-Month Period from 1 January 2009 to 31 March 2009
Investment Objective
The investment objective is to provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
Performance Summary
| Total Return * | For the three month period ended 31 March 2009 | For the nine month period ended 31 March 2009 |
| Net asset value per share | -9.8% | -37.7% |
| Ordinary share price | 0.2% | -28.2% |
| Investment Property Databank UK Monthly Property Index | -7.1% | -23.5% |
| FTSE All-Share Index | -9.1% | -28.3% |
| Capital Values - 3 months | As at 31 March 2009 | As at 31 December 2008 | % Change |
| Net asset value per share | 70.7 | 80.4 | -12.1 |
| Ordinary share price | 49.0 | 51.0 | -3.9 |
| FTSE All-Share Index | 1,984.2 | 2,209.3 | -10.2 |
| Discount to net asset value | 30.7% | 36.6% | |
| Net gearing # | 30.6% | 38.1% | |
| Capital Values - 9 months | As at 31 March 2009 | As at 30 June 2008 | % Change |
| Net asset value per share | 70.7 | 121.0 | -41.6 |
| Ordinary share price | 49.0 | 75.0 | -34.7 |
| FTSE All-Share Index | 1,984.2 | 2,855.7 | -30.5 |
| Discount to net asset value | 30.7% | 38.0% | |
| Net gearing # | 30.6% | 30.8% | |
Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.
* - All total returns are based on net dividends re-invested
# - Net gearing: Bank debt (less cash) divided by total assets less current liabilities
Dividends
The second interim dividend for the year ended 30 June 2009 of 1.8 pence per share was paid on 27 March 2009. In the absence of unforeseen circumstances it is the intention of the Board to maintain quarterly dividends at this rate, giving a total dividend of 7.2 pence per share for the 2008/9 financial year.
Review for the Period
During the first quarter of 2009 property values have fallen further, but the rate of decline has been less severe than in the final quarter of 2008, indicating a deceleration in the commercial property downturn.
The market has seen some key investment transactions completed over the last quarter with a number of investors, mainly equity backed and not reliant on bank finance, identifying opportunities to purchase property at attractive yields with secure income streams.
Whereas it may still be too early to call a recovery in the market, this does signal that there is some investor appetite for commercial property. However, the availability of debt is severely restricted which reduces the number of purchasers able to enter the market.
In March the company sold its holding at 48/49 St James Street London SW1. The Company achieved a sale price of £16.0m which reflected a net initial yield of 4.35%. The property was purchased for £10m at the time of the launch of the Company in 2004 and the sale price, well in excess of the December 2008 valuation of £14.35m, crystallised a significant profit for the Company at a time when the West End office market is suffering a severe downturn.
The cash proceeds from this sale reduced the net borrowings of the Company to approximately £44.0 million, giving a Loan to Value ('LTV') percentage of 30.6% as at 31 March 2009, compared with an LTV of 38.1% as at 31 December 2008, comfortably within the LTV restriction of 60%.The other important covenant is the amount by which rental income covers interest, with a minimum restriction of 150%. As at 31 March 2009 the interest rate cover was 245%, providing significant excess capacity.
The vacancy rate on the Company's portfolio has fallen from 3.9% at 31 December 2008 to 3.2%, which is significantly lower than the IPD average of 11.7% (Source IPD Monthly Index March 2009). This reduction in the Company's void rate is due to the sale of St James Street where two office floors had become vacant.
The Company's portfolio had a negative capital return of 5.6% and an above average income return of 1.7%, giving a total return for the quarter of -4.0% (as measured by IPD). This compared to the IPD Monthly Index of -7.1%. This out-performance was largely achieved as a result of the sale of St James Street.
Top Ten Holdings
| Property | Sector | 31/03/2009 Percentage of portfolio |
| Unit 3663, Echo Park, Banbury | Industrial | 10.4% |
| Units 1-8, Lakeside Road, Colnbrook | Industrial | 8.6% |
| Mercury House, 1 Dove Wynd, Strathclyde Business Park | Offices | 7.4% |
| 1-2 Lochside Way, Edinburgh Park, Edinburgh | Offices | 6.9% |
| 30/40, The Parade & 47/59A Warwick Street, Leamington Spa | Retail | 6.5% |
| Southampton International Park, Eastleigh | Industrial | 6.5% |
| Hemel Gateway, Boundary Way, Hemel Hempstead | Industrial | 5.5% |
| Clifton Moor Gate, York | Retail Warehouse | 4.6% |
| Swift House, Cosford Lane, Rugby | Industrial | 4.1% |
| 7-8 High Street and 50 Colebrook Street, Winchester | Retail | 3.5% |
| Total | 64.0% |
Geographical Analysis
| Location | 31/03/2009 Percentage of Portfolio | 31/12/2008 Percentage of Portfolio | |
| South East | 50.5 | 50.8 | |
| West Midlands | 16.9 | 16.6 | |
| Scotland | 16.0 | 15.8 | |
| Yorkshire and Humberside | 4.4 | 4.6 | |
| East Midlands | 3.4 | 3.3 | |
| Eastern | 2.7 | 2.7 | |
| London - West End | 2.3 | 2.3 | |
| Rest of London | 1.8 | 1.8 | |
| South West | 0.8 | 0.8 | |
| North West | 0.7 | 0.7 | |
| North East | 0.5 | 0.6 | |
| Total | 100.0 | 100.0 |
Sector Analysis
| Sector | 31/03/2009 Percentage of Portfolio | 31/12/2008 Percentage of Portfolio | |
| Offices | 22.9 | 29.9 | |
| Retail | 34.7 | 30.7 | |
| Industrial | 38.0 | 34.9 | |
| Retail Warehouse | 4.4 | 4.5 | |
| Total | 100.0 | 100.0 |
The Board is not aware of any significant events or transactions which have occurred between 31 March 2009 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Quarterly and Key Information
Further information regarding the Company, including performance since launch and the most recent annual and interim reports, can be found at the Company's website www.irppropertyinvestments.com, or at www.fandc.com.
For further information please contact:
Ian McBryde/Scott Macrae
F&C Investment Business Limited
Tel: 0207 628 8000